Payment Bond vs. Performance Bond: How Each One Works
A payment bond vs. a performance bond: one guarantees your subs and suppliers get paid, the other guarantees the job gets finished, and Florida public contracts usually require both.
Last updated: October 19, 2026
What is the difference between a payment bond and a performance bond?
A performance bond protects the project owner by guaranteeing the contractor finishes the work as the contract requires. A payment bond protects subcontractors, laborers and suppliers by guaranteeing they get paid. Both come from a surety company, usually equal the contract price, and Florida public jobs above set thresholds require the two together.
A payment bond and a performance bond usually arrive together, on the same job, from the same surety company. They protect different people, though. A performance bond protects the project owner if the contractor does not finish the work. A payment bond protects the subcontractors, laborers and suppliers if the contractor does not pay them. This guide explains how each bond works, where a bid bond fits in and when Florida law asks for both.
What Is a Performance Bond?
A performance bond is a guarantee that the contractor will complete the job according to the contract. Three parties are involved: the contractor (the principal), the project owner (the obligee) and the surety company that backs the promise.
If the contractor defaults, walks off the job or delivers work that does not meet the contract, the owner can make a claim on the bond. A performance bond is not insurance for the contractor, though. If the surety pays a claim, it expects the contractor to pay it back. That is why the surety looks so closely at your finances before it writes the bond.
What Is a Payment Bond?
A payment bond guarantees that the people who work on the project and supply its materials get paid. If the contractor fails to pay a subcontractor, a laborer or a supplier, that unpaid party can file a claim against the bond instead of chasing the contractor.
On private jobs, unpaid workers and suppliers can usually place a lien on the property. Public property cannot be liened, so on public jobs the payment bond takes the place of lien rights. On a private Florida job, an owner can also require a payment bond under the state’s lien law (section 713.23, Florida Statutes) to keep liens off the property.
Performance and Payment Bonds Compared
| Performance bond | Payment bond | |
|---|---|---|
| Protects | The project owner | Subcontractors, laborers and suppliers |
| Guarantees | The work is finished as the contract requires | The people on the job are paid |
| Who makes a claim | The owner | An unpaid sub, worker or supplier |
| Usual amount | The contract price | The contract price |
Most public contracts ask for both bonds at once, which is why contractors often treat them as a single package. Both come from the same surety and are underwritten together.
Where a Bid Bond Fits In
A bid bond comes first. It goes in with your bid and promises that, if you win, you will sign the contract and deliver the performance and payment bonds the job requires. If the winning bidder backs out, the bid bond pays the owner part of the extra cost of awarding the job to the next bidder. Once the contract is signed, the bid bond has done its job and the performance bond takes over.
Performance Bond Requirements on Florida Public Jobs
On public construction in Florida, section 255.05 of the Florida Statutes requires the contractor to post a payment and performance bond before work begins. The bond must come from a surety authorized to do business in Florida and generally equals the contract price. There are thresholds: state work on a contract of $100,000 or less needs no bond, and a county, city or other public entity may waive the bond on a contract of $200,000 or less.
The payment bond on a Florida public job comes with strict deadlines. A sub or supplier who does not deal directly with the contractor must serve written notices on time, the last one no later than 90 days after their final delivery of work or materials. A lawsuit on the bond generally has to be filed within one year. If you supply public jobs, put those dates on your calendar the day you start.
Private owners and lenders set their own rules, and many commercial owners ask for both bonds in the contract even when no law requires them. Most also want proof of liability coverage before work starts, which a contractor insurance program provides.
How to Get a Performance Bond
Getting bonded works more like applying for credit than buying a policy. Expect the surety to ask for:
- Your company’s financial statements, often prepared by a CPA on larger programs
- Personal financial statements from the owners
- A list of work in progress and completed projects
- Bank references and details of your line of credit
- The contract or bid documents for the job
The surety reviews all of it and sets a single-job limit and an aggregate limit, which together make up your bonding capacity. A new contractor usually starts with a smaller limit that grows as the company completes bonded work.
The premium is a percentage of the contract amount, set from your credit, your financial strength, your experience with similar jobs and the size of the contract. Payment and performance bonds are usually priced together as one premium, and stronger financials tend to earn better terms. Our contract bonds page lists everything to have ready, and our guide to business owners policy vs. general liability covers the liability side of the same contracts.
Get your contract bond quote and we will take your file to multiple surety companies at once.
Who helps Florida contractors get bonded for public work?
American US Insurance is an independent agency in Miami that places bid, performance and payment bonds for Florida contractors. We gather your financials once, take your file to multiple surety companies and explain the bonding capacity each one offers, from your first bid bond to the bonds on a large public contract.